Translated material
Privatization the African way
RUSAL was accused of colluding with the President of Nigeria
RUSAL, as it became known yesterday, received a claim for $2.8 billion from the American company BFI Group, whose founder is the Nigerian native Ruben Jaja. The plaintiff accuses the Russian company of colluding with senior Nigerian officials during the privatization of a 77.5% stake in the Nigerian aluminum smelter Aluminum Smelter Company of Nigeria (Alscon). The lawsuit was filed late last week in a New York court. RUSAL is surprised by this turn of events and believes that consideration of the issue challenging the results of the competition in Nigeria cannot fall within the jurisdiction of American law. “We believe that this is nothing more than a PR campaign and outright blackmail on the part of the BFI Group, designed to draw attention to this company. We deny all the accusations in essence, and it is also unclear why it was filed in America,” Vera Kurochkina, director of RUSAL’s media relations department, told Vremya Novostey. According to her, the Russian company is now “evaluating the issue of proper service of the claim.”A month and a half ago, RUSAL announced the purchase of a stake in 77.5% of shares (Alscon) for $250 million with investment obligations of $150 million for the next three years. This asset went to RUSAL after the winner of the competition for this asset held in July the year before last - a consortium of South Korean Daewoo and BFI Group - was denied the right to purchase this asset due to a delay in making the first payment. Apart from this consortium, only RUSAL participated in the competition.
The consortium of Daewoo and BFI Group offered $410 million for Alscon and promised to invest another $300 million in the development of the enterprise. However, BFI Group and its partner were unable to pay a competitive deposit in the amount of 10% of the declared amount of the value of the asset within the established period (10 days). . The Nigerian government suspected that BFI Group was generally insolvent and, after checking its account data, disqualified the company. Thus, there was only one contender left for the Nigerian asset - RUSAL, with which negotiations immediately continued.
BFI Group tried to challenge the Nigerian government's disqualification actions and filed lawsuits in the Nigerian courts of appeal. The Court of First Instance dismissed her claim against the Bureau of Public Enterprises of Nigeria on all counts. In a lawsuit filed in a New York court, BFI Group writes, Interfax reports, that representatives of the Russian company, after opening the envelopes, held an “illegal meeting” with Nigerian President Olesugun Obasanjo and a number of other top officials of the country, after which the country’s government demanded that BFI Group pay 10% of application amount within 15 days. Despite the fact that this requirement allegedly violated the preliminary contract for the sale of Alscon, the statement said, by refusing to comply with it, BFI Group was excluded from the tender. RUSAL was declared the winner, increasing its offer from $205 million to $250 million.
In general, Alscon seemed to be a very problematic asset for the Nigerian government. In 2000, production at the enterprise was stopped due to difficulties with gas supplies and access to sea transport routes, as well as a lack of working capital. In fact, the company went bankrupt. At that time, about 10% of the plant belonged to Reynolds Metals, which was later absorbed by the American Alcoa. However, later, considering this asset unprofitable, it sold this share to the Nigerian government. Another 20% of Alscon belonged to the German Ferrostaal AG, which then reduced the share to 7.5%, which it still owns. The rest belonged to the Nigerian government. Over the entire period of operation, Alscon produced only 40 thousand tons of primary aluminum with a design capacity of the plant of 193 thousand tons per year.
The Nigerian authorities have been trying to sell a controlling stake in the plant since the beginning of 2003. But the auction date was postponed several times. Many of the companies that initially bid for this asset subsequently withdrew from the competition. And the fact that more than a year and a half passed from the moment of the informal agreement with RUSAL on the conditions for receiving the package until the signing of the agreement indicates the difficulties in carrying out activities in Nigeria.
But RUSAL really needs Alscon. Its purchase will allow the company to create a closed production chain in West Africa: RUSAL has its own bauxite mines and alumina facilities in Guinea - the Compagnie des Bauxites de Kindia mining plant and an alumina refinery in the city of Fria.
The company believes that the lawsuit filed by the Nigerian side is obviously unsuccessful, because the decision to sell was made by the Nigerian government. RUSAL, presumably, will have problems only if the plaintiff manages to prove the fact of bribery during the competition. But, judging by the text of the claim cited by Interfax, BFI Group has no such evidence.